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TMI Blog2010 (3) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the decision in the case of CIT vs. Vinay Cement Ltd. [ 2007 (3) TMI 346 - SC ORDER] that the employees contribution paid before the due date for filing the return of income is allowable as a deduction. We delete the disallowance was paid after the due date but before the grace period and was paid after the grace period but before the due date for filing the return of income. The first ground is accordingly allowed. Disallowance of the expenses - commission and brokerage - HELD THAT:- The assessee is following the mercantile system of accounting. It is also true that the sales as well as the commission and brokerage related to the earlier years. The assessee s claim is founded on the consistent method of accounting followed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an appeal by the assessee and it relates to the assessment year 2002-03. The assessee is a company manufacturing cotton yarn and knitted fabrics. The appeal arises out of the assessment made under section 143(3) of the Income Tax Act, 1961, on 19th January 2005. 2. The first ground is against the disallowance of Rs.14,02,512/- out of the deduction of Rs.15,55,727/- claimed by the assessee on account of payment of employees contribution to Provident Fund. A perusal of the assessment order shows that the assessee claimed deduction of Rs.15,55,727/- on account of employees contribution to Provident Fund. This consisted of payment of Rs.1,55,215/- made before the due date, Rs.5,62,450/- made after the due date but within the grace perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed as a deduction. He also held that the concept of grace period cannot also be applied to allow deduction in respect of payments made after the due date but within the grace period. In this view of the matter he sustained the disallowance against which the assessee is now in appeal. 4. The learned counsel for the assessee relied on several orders of the Mumbai Benches of the Tribunal in support of his contention that the employees contribution should be allowed under section 43B if it is deposited within the due date for filing the return for the assessment year in question. In the case of Simplex Engineering Foundry Works P. Ltd. vs. JCIT, in ITA No: 5760/Mum/2006 dated 29th November 2007 (assessment year 2003-04) and connected ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of the Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) and accordingly held that the contribution of the employees , if paid before the due date for filing the return of income as contemplated by the proviso to section 43B, is to be allowed as a deduction. In the case of Radhakrishna Foodland Pvt. Ltd. vs. ACIT, in ITA No: 4211/Mum/2006 (assessment year 2003-04), the Tribunal by order dated 11th February 2008 held, following the view taken by the Supreme Court in the case of CIT vs. Vinay Cement Ltd. (2007) 213 CTR 268 (SC), that the employees contribution paid before the due date for filing the return of income is allowable as a deduction. There is thus a series of orders of the Mumbai Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be said to have accrued to the assessee only in the relevant year when the sale proceeds were realized. The Assessing Officer on verification found that the assessee s claim that the debit notes for commission payable to the commission agents were raised and received only during the relevant year was not correct. He found that the assessee received debit notes which contained the calculation of the commission in the earlier year and not a single debit note was received during the year under appeal. He, therefore, held that the liability to pay commission and brokerage cannot be said to have crystallized in the year under appeal. He, therefore, disallowed the amount of Rs.24,34,266/-. 6. On appeal, the CIT(A) held that the assessee is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are in the same year. It needs to be clarified that the sales in respect of which the commission has been paid, were taken credit in the Profit and Loss Account in the years in which the invoices were raised, i.e. in the earlier years. The Department s claim is that the assessee should have made a provision for commission and brokerage payable in the earlier years and claim the provision as a deduction. What the assessee has done is to claim the deduction for commission and brokerage, not in the year in which the sales took place, but in the year in which the sale proceeds were realized. This is stated to be in accordance with the company s policy of paying commission only when the sale proceeds are realized. It seems to us that the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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